A Kuwaiti creditor is refusing to agree to a debt settlement deal with Abraaj, which could push the private equity firm to seek provisional liquidation, three sources close to the matter said.

The refusal by Kuwait’s Public Institution for Social Security (PIFSS) to join other creditors in a debt freeze may complicate Abraaj’s efforts to sell its investment management unit to New York-based Cerberus Capital Management, the sources told Reuters.

Abraaj, which bankers estimate has debt of about $1 billion, is already grappling with allegations that it misused investor money. The Middle East and Africa’s largest private equity firm has denied any wrongdoing.

Two sources said Abraaj had started preparations for applying for provisional liquidation, a process in which a court appoints a liquidator on a provisional basis before hearing or ruling on a petition to wind up a company.

A separate source close to Abraaj said that a provisional liquidation was not its focus and it was working on reaching a consensual deal with secured and unsecured creditors.

Abraaj said in a statement to Reuters that it was continuing to engage closely with a single creditor, which it did not name, “to reach a consensual outcome for the benefit of all parties.”

“The firm is continuing its discussions on the sale of the fund management business and talks are at an advanced stage,” Abraaj said, adding it was working with potential acquirers and other stakeholders “toward achieving a positive outcome.”

Abraaj, which is being advised by Houlihan Lokey (HLI.N), said it was focused on concluding a standstill agreement with creditors, saying the “vast majority” of them backed the debt deal.

Sources said the standstill agreement was needed to help facilitate the sale of its investment management business to Cerberus. But sources said PIFSS, an unsecured lender, held out and was given a 48-hour deadline to agree.

The Kuwaiti fund has since notified Abraaj that it intended to continue a winding up petition it filed through the Cayman Islands last month, the sources said. The next hearing in the process is scheduled for June 29, one of the sources said.

The Wall Street Journal reported last week that PIFSS filed a case in a Cayman Islands court against Abraaj, claiming it was unable to repay a $100 million loan and $7 million interest.

Officials at PIFSS were not immediately available for comment. Its management has previously declined to comment on an ongoing legal action.

A sale of the Kuwaiti creditor’s position to debt funds could help overcome the impasse in the process, the sources said.

A number of distressed debt buyers had emerged to potentially buy the Kuwaiti creditor’s claim, two sources said, but they said PIFSS was not willing to sell.

Cerberus, which manages assets totaling more than $30 billion, specializes in investments in distressed assets. The U.S. company has not responded to Reuters requests for comment.

Abraaj is facing an investigation by some investors, including the Bill & Melinda Gates Foundation and the World Bank’s lending arm over how the firm used some of their money in its $1 billion healthcare fund.